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Illinois Appellate Court Holds Lender Did Not Violate "Single-Refiling Rule"

The Third Appellate District of Illinois ruled that successive filing of a foreclosure complaint did not violate the Illinois “Single-Refiling” rule, thus avoiding an involuntary dismissal.  The Third District in Wells Fargo Bank, N.A., v Norris, 2017 IL App (3d) 150764 focused on the default dates plead in each of the successive filings and ruled as a matter of law that each successive default date creates an independent cause of action.
 
The Third Appellate District of Illinois ruled that successive filing of a foreclosure complaint did not violate the Illinois “Single-Refiling” rule, thus avoiding an involuntary dismissal.  The Third District in Wells Fargo Bank, N.A., v Norris, 2017 IL App (3d) 150764 focused on the default dates plead in each of the successive filings and ruled as a matter of law that each successive default date creates an independent cause of action.  Servicers and their counsel may use this ruling to preserve the ability to foreclose in the face of default servicing issues. 
 
Plaintiff's counsel in Norris filed three successive foreclosures: July, 2008 pleading a default date of January, 2008, a second action on March 2010 pleading a default date of June 2009 and again on March, 2012, pleading a default date of January, 2008, as plead in the initial foreclosure action.  Plaintiff voluntarily dismissed the first two matters before filing the third action.
 
The pro-se debtor argued at trial in opposition to summary judgment that the Illinois single-refiling rule, 735 ILCS 5/13-217, prevented plaintiff from proceeding with any foreclosure following dismissal of the second action.  Both the trial court and the appellate panel rejected this analysis.  At the hearing on summary judgment, the trial court judge observed that strict application of defendant's interpretation of the single-refiling rule would frustrate the operation of Illinois Mortgage Foreclosure Law and provide a legal incentive for lenders to refuse reinstatement after an initial default and cure. 
 
On appeal, the Third District made special note that while the first and third foreclosure filings plead the same default date, the second did not.  Because of this, the appellate court ruled the second filing, pleading a different default date and unpaid principal balance, was not the same cause of action as the first filing.  Because the third filing implicated the same default date as the first, the third filing was deemed as a matter of law to be the only filing that triggered application of the single-refiling rule.  

INDUSTRY IMPACT: WHAT IT MEANS FOR SERVICING
The ruling that each separate installment is a separate cause of action provides significant assistance to default servicers and their counsel.  There are occasions in default servicing when difficulties with payment application and default servicing obligations imperil the ability to declare a default, accelerate or otherwise begin the default servicing process.  Unfavorable court rulings can prevent further collection of the particular installment in issue, or more problematic, prevent the lender from declaring a default as to that installment.  Because each installment constitutes a separate cause of action, a default servicing lender gets an opportunity to “reset” its servicing efforts and adjust or correct default servicing errors or omissions through normal default servicing of subsequent installments.  This process permits a lender to preserve its ability to foreclose based on a different loan installment, should facts permit. 
 
The response brief filed by counsel for the lender relied on Illinois precedent in interpreting the effect of an installment note.  This case is the first time an Illinois court had an opportunity to extend these principles to a mortgage note securing residential property, and will be helpful to servicers and counsel in the future.  

By Mike Timothy, Shapiro Kreisman & Associates, LLC, ALFN Member in Illinois. Mike can be reached at mtimothy@logs.com